Tuesday, 4 August 2009

Credit crunch continues for UK manufacturing

This table neatly sums up the true nature of the UK banking system. It gives the quantity of outstanding loans to the corporate sector.

Manufacturing has only £58 billion outstanding loans, while financial intermediation, otherwise known as the shadow banking system, has received over to £700 billion pounds in loans. Moreover, the stock of outstanding loans to manufacturing firms has fallen by almost 10 percent, while lending to shadow banks is up over 5 percent.

Now we can see what this bank bailout was really about. It wasn't about protecting jobs. The manufacturing sector is still suffering from a terrible credit crunch. This bail out was about protecting the shadow banking system. It was about protecting a small group of greedy self-serving financiers.

7 comments:

I think your article is too harsh. Over the quarter the lending to other financial corporations only increased by 2bn. The annual 5% figure is misleading and reflects a very turbulent period which hopefully has come to an end.

Deposits from other financial corporations increased by 20bn. This makes the 2bn of lending sound insignificant.

@anon 21.24I think Stalin 2.0 would realise his mistake and understand that you need money for communism to win. He would go back to his roots and join the British Communist Party and hire the best spin doctors around to re-invent the party.

He would embrace the banking system as an indebted people are easy to control and manipulate. While at the same time proclaiming an end to world poverty and claiming to be the one true protector of the common British working man.

We would be outraged that mother Russia lost the war in Afghanistan and invade Afghanistan again, but up the ante to show how strong he was and invade another country at the same time, say, i dont know Iraq as an example.

He would create false panic and fear in the population to get support for the removal of civil liberties. Any that speak out against the new totalitarian state would be locked them up in jail without charge and for the worst offenders he would out-source their torture to others.

All school children would receive above average grades so the poor can overcome the oppression of the rich. He would careful explain to the unemployed how elitist professionals keep them downtrodden and out of work.

Alice - what do you make of the current bounce in houseprices? - it shouldn't be!

Something really weird is happening presently - in all other UK housing busts (i.e. the previous three), house prices went below trend for a while - but presently they have touched the long-term trend and bounced up.

I think this can only be because there is excessive credit going to the housing market.

Lending is going to the wrong borrowers - is it a weird consequence of the policy of a government desperate to create a middle England feel-good factor (= houses still worth silly sums) before the next election?

Or are the Brits so deluded by silly past levels of lending that reality has not dawned - that all this credit has to be paid back?

Or - is the present reflationary effort so massive that there will be a temporary upward blip until the election, after which sane monetary policy will reassert itself and with high taxation and interest rates, the rest of a 'great depression' arrives - five or ten years of recession?